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Executive Compensation at Lehman Brothers
Case 9 100 2014 006
Languages : 
  • English
Keywords: 
  • Executive compensation,
  • Lehman Brothers,
  • Risk-taking incentives
Year of production : 
2014
Registration date : 
2014-10-29
Teaching notes included : 
Yes
Abstract

This case studies executive compensation at Lehman Brothers prior to the investment bank’s bankruptcy, in 2008, which played a key role in the worst global financial crisis in 70 years. Using information on the compensation of top executives at Lehman Brothers, the objective is to determine whether key decision-makers had incentives to take excessive risks, or whether their incentives were largely aligned with those of the bank’s shareholders.

Primary domain : 
Business ethics  - Governance
Secondary domain : 
Finance
Sectors : 
  • Banking and financial services
Source : 
HEC Montréal
Type : 
Traditional case (Descriptive or analytical case)
Type of data used in the production of the case : 
Factual data that is public and free of potentially litigious content
Event location : 
New York City
Year of start of the event : 
2008
Year the event ended : 
2008
Business size : 
Multinational
Main themes covered
  • Governance
  • Incentives
  • Executive compensation
  • Principal-agent problem
  • Risk taking
  • Bank regulation
  • Financial stability
Teaching objectives

The objective is to determine whether key decision-makers at a leading financial institution had incentives to take excessive risks, or whether their incentives were largely aligned with those of the bank’s shareholders.

Concepts and theories related to the case
  • Executive compensation
  • Risk taking
  • Incentives
  • Principal-agent problem
  • Financial stability